The action thus far today has been a pretty good example of when a stock market phenomenon becomes too obvious to continue. There has been much hoopla about how bullish the first day of each month has been, and when we ramped up to 1332 on the S&P 500 first thing this morning, the temptation was to assume that the bulls would deliver another grand slam. However, we have not only given back this morning’s gains, but most of yesterday’s as well. The lesson is that whenever something in the market appears to be a sure thing, it usually is too good to be true.
On the one hand, we are still well above last week’s lows and could easily be consolidating here before moving average. Indeed, I would be looking for a few days of quiet action after today in order to set charts back up for some actionable long swings. On the other hand, we are seeing some of those bear flags that I wrote about last night weaken, such as BIDU FCX. However, shorting bear flags in an overall uptrend is often a trap that bears fall into more than they care to admit.
The bottom line is that since last week we have gone straight down and then back up in a “V,” and this usually leads to many sloppy charts underneath the surface. So long as the bulls can provide an underlying bid to this market, we could finally see more than just a few select charts set up for enticing longs again, after a few days of consolidation after today. I am looking to see which side shows more initiative here, with the bulls eyeing today’s highs of 1332, while bears are targeting last week’s lows of 1294 on the S&P.
Bought LLEN.